Share!The US Treasury completed the settlement of its biggest slug of supply in a while on Thursday and Friday, and the markets yawned. Stocks saw minor pressure. Bonds were firm, as they have been for the past 2 weeks. Download this report to learn what may be behind that and what to look for in…

Share!Cycle screening measures strengthened on Friday, following through on the gains of this week. Under normal circumstances, when these measures strengthen against a down day in the market, it usually means the rally has further to go. However maybe this time is different. Download this report to view the charts, tables, and a succinct analysis…

Share!The market pulled back slightly on Friday, setting up a new potential short term downtrend channel. That channel should either be validated or broken early next week. Download this report to find out what needs to happen for clearer short term signals and why calling the intermediate and longer term trend is even more difficult.

Share!Withholding tax collections have weakened in July, breaking down from the narrow range of 5-6% annual nominal growth they had been in throughout the second quarter. The nominal growth rate declined to +2.4% this week, which is near or below zero growth in real terms, depending on what you believe the inflation rate to be.…

Share!Cycle screening measures strengthened on Thursday, following through on the earlier gains of this week and suggesting that the rally has further to go. However, the trading range has become so thin after so many crossings over a period of months that it is virtually frictionless. These indicators gave little forewarning of a turn at…

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On GE, Just Say "No"

Kansas City Southern (KSU) is a nice little railroad company. The stock is up 40% the past six months.

The company is well run and is profitable. Some highlights from the bosses on the 2011 results:

“KCS’s solid fourth quarter put the final touches on a successful 2011,” stated David L. Starling, president and chief executive officer.

For the full year 2011, revenue was a record $2.1 billion, up 16% over 2010. This is the first time that KCS generated annual revenue above $2 billion. Carloads for 2011 were 2 million, the first time annual volumes reached the 2 million threshold.

Full-year operating income was $612 million, a 26% increase over the prior year, and the Company’s 2011 operating ratio was 70.9% compared with 73.2% in 2010. Diluted earnings per share for full year 2011 were $3.00 compared to $1.67 for 2010.

Moody’s likes KSU, they just upgraded it a notch to Ba1.

RATINGS RATIONALE

With a rapid restoration in freight volume and yield, Kansas City Southern’s credit profile has improved materially.

If this company wanted to raise some cash they could do it in a week. Given their current market cap of $7.5 billion, it could do a secondary offering of stock and raise $100mm in the bat of an eye. If it wanted debt financing, that too would be available from yield hungry investors. Given the strength of the balance sheet, I think they could add another $200mm in debt without much of a problem at all.

But KSU is not going to the capital markets for the money they need to expand. Why should they? After all, Uncle Sam is willing to lend them cheap money: (Link)

Kansas City Southern Railway Company (KCSR) has taken out a $54.6 million Federal Railroad Administration-administered Railroad Rehabilitation and Improvement Financing (RRIF) Program loan to purchase 30 new General Electric diesel-electric locomotives.

I’m so sick of seeing this day after day. Washington is shelling out taxpayer money to support this successful company so they can buy locomotives from GE.

GE pays next to no taxes in the US, they haven’t for years. But when it comes to government money, they are on the top of the list for handouts. There is only one reason that GE keeps sucking on the country’s teat, the CEO is best buds with Obama. Not only are they pals, but GE’s top honcho, Jeff Immelt, is advising the President on what to do.

There are many segments of our economy and society that need a helping hand from the government. I would put the interests of GE (and KSU) at the very bottom of the list. They are doing fine, they don’t need these handouts. This is not an industrial policy. It’s crony capitalism of the very worst kind.

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